SP 500 Revenue Update: First Signs of Stabilization in Expected Q2 ’20 Revenue

The constant focus on SP 500 earnings often overlooks the importance of SP 500 revenue.

The same quality analysis of SP 500 earnings by IBES data by Refinitiv, doesn’t always extend to SP 500 revenue. Readers of Refinitiv data reports don’t get the forward look on SP 500 revenue that those who scrutinize earnings data.

Here is a quick tracking of the expected Q1 and Q2 ’20 SP 500 revenue growth rates since the Coronavirus issue started in mid-February ’20:

  • 5/29/20: -1.4% and -12.3%
  • 5/22/20: -1.4% and -12.3%
  • 5/15/20: -1.7% and -12.2%
  • 5/8/20: +0.3% and -12.1%
  • 5/1/20: +0.1% and -10.6%
  • 4/24/20: -0.3% and -9.2%
  • 4/17/20: +0.3% and -.6.7%
  • 4/10/20: +0.7% and -4.3%
  • 4/3/20: +1.4%, and -2.1%
  • 3/27/20: +2.1%
  • 3/20/20: +2.5%

Data source: IBES data by Refinitiv

The revenue data for the next quarter doesn’t show up until the first day of the previous quarter, so 2nd quarter revenue is missing until the first of April, ’20.

Readers will see expected 3rd quarter revenue on July 1 and after, week-by-week.

It’s no mystery that revisions are negative, but as readers can see, the last two weeks of expected 2nd quarter revenue have been stable, and haven’t been revised lower. I would wait until we see w few more weeks of data, but it is an early change in trend.

The biggest worry from this week was Salesforce’s downside guidance for the July quarter and the rest of the year. That’s a cloud software business, which should be relatively immune from the rest of the economy. Maybe Marc Benioff thought that better to dramatically underpromise was the best course of action. The quarter itself was a reasonable beat on both top and bottom lines.

SP 500 earnings data:

  • The “average” growth rate for 2020 and 2021 remains 4% for the 6th consecutive week.
  • The SP 500’s PE as 24x, which is rich. That’s based on the forward estimate of $128.51
  • The SP 500’s earnings yield is 4.22% after peaking at 7.30% the week of March 20th, 2020

Like the story of the last 4 weeks detailed here, here and here, the rate of negative revisions continues to improve for the SP 500 EPS:

click to enhance / open / expand

 

Jeff Miller of adashofinsight fame, sent me this SP 500 earnings analysis today from WisdomTree.com.

I’ll try to address some of the issues covered in a separate post, not as a rebuttal, but as perspective.

Summary / conclusion: The expected 2021 SP 500 EPS is now within $1.00 of the actual 2019 SP 500 EPS of $162.93. Q2 ’20 SP 500 EPS is now expected to fall 42% on the expected 12.3% drop in revenue noted above. media pundits will be screaming about Q2 ’20 earnings through August, but the SP 500 – the benchmark itself – is now well through this quarter and discounting what is likely to be Q1 ’21.

Don’t forget the Presidential election either. That matters.

Take everything read here with a substantial grain of salt and consider everything in light of your own financial circumstances.

I remain more optimistic of “expected” stock returns over the next few years than probably most. The corporate bond market offers great value in my opinion, as noted last week.

Here is one reason the data suggests investors stay bullish.

More to come this weekend.

Thanks for reading.

 

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